Pound-to-Euro Forecast: GBP/EUR Fragile Despite Modest Rebound

Published: Tuesday, 18 November 2025 09:30 BST - Written by Frank Davies

STORY LINK Pound-to-Euro Forecast: GBP/EUR Fragile Despite Modest Rebound

The Pound to Euro exchange rate (GBP/EUR) staged a modest recovery to 1.1345 on Monday, but fiscal uncertainty continues to keep Sterling on a short leash as markets wait for clarity ahead of the November Budget.

GBP/EUR Forecasts: Creeps Higher

The Pound to Euro rate secured a tentative recovery to 1.1345, creeping further away from 30-month lows posted last week.

After a wobble on Friday, risk appetite has stabilised which has helped underpin the Pound, but there is still a high degree of uncertainty over fiscal policy.

The UK bond market will continue to be watched closely as a barometer of underlying confidence.

The 10-year bond yield edged lower to 4.56% on Monday from Friday’s close around 4.58%

ING expects Pound selling on rallies; “we doubt EUR/GBP needs to trade much under 0.88, if at all.” (GBP/EUR selling on approach to 1.1360).

MUFG is continuing to forecast a decline to 1.1240.

Fiscal policy will continue to be a key driver of Pound sentiment.

Following the reported U-turn on income tax hikes on Friday, there has been no push back from government officials.

It appears that the most likely outcome now is that the freeze on tax-free allowances will be extended for a further two years with further limited tax hikes, but there is still a lack of clarity.

ING commented; “It has been quite easy to lose track of the UK government's messaging regarding November's budget. Whether an increase in major income taxes is required or not is uncertain.”

There have also been reports that the Office for Budget Responsibility (OBR) will lower its estimate of the fiscal gap, lessening the need for tax increases.

According to MUFG there are still causes for concern; “While news of a smaller fiscal hole would normally be supportive for gilts and the pound, it has not fully provided reassurance that the government’s decision was not politically motivated. Fiscal tightening measures without an income tax hike is viewed as less credible by market participants reinforcing negative pound sentiment in the near-term.”

Monetary policy will also be a key factor for the Pound.

The latest UK inflation data is due on Wednesday and will have an important impact on interest rate expectations.

Consensus forecasts are for the headline rate to retreat to 3.6% from 3.8% previously with the core rate edging lower to 3.4% from 3.5%.

The data on services-sector inflation is also likely to be a key element for both the Bank of England and market expectations.

ING commented; “a softer UK October CPI number tomorrow could easily see sterling under a bit more pressure again.”

Late in the week, the latest PMI business confidence data will be released for both the UK and Euro-Zone.

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TAGS: Pound Euro Forecasts